The S&P 500 e-mini contract continues to destroy accounts, as it is just simply chopping around wildly at the latest rumor. At this point, we are in the midst of earnings season, which typically is very volatile to begin with. Add to that the fact that the world seems to be hanging on the edge of every Federal Reserve rumor, then you have a recipe for what we are seeing on the chart. The market is just simply chopping back and forth with no real clear direction, although the overall downtrend is still very much intact.
With this being said, I think it’s probably only a matter of time before we see this market reach towards the bottom, but we may have a couple of vicious rallies in the meantime. You never know, Wall Street always seems to find some type of narrative to hang onto. All one has to do is turn on CNBC, and there’s always a rumor or a theory or something to get people to buy stocks. However, never forget that it’s the job of Wall Street to sell you stocks. In other words, it’s not always the right time to own them.
In the macroeconomic outlook that we have at the moment, there’s no real reason to think the earnings are suddenly going to be strong. In fact, it’s really difficult to take any rosy outlook as far as forward guidance seriously at all. There just are far too many unknowns out there to think that we have a situation where you can take on a ton of risk all of the sudden. I do believe that it is more likely than not going to continue to be a situation where you cannot hang onto a trade for very long.
Be suspicious of rallies
- The 3800 level above continues to be massive resistance, and I do think that we have a situation where if we were to break above there, the 50-Day EMA comes in the picture as well.
- Any rally at this point has to be looked at with significant suspicion, mainly because the Federal Reserve is nowhere near trying to loosen monetary policy, and that’s exactly what Wall Street needs to function.
- We have an entire generation of traders out there that have no idea how the trade without the Fed Put.
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